News and Press Releases of DIW Berlin News and Press Releases en DIW Berlin The Greek private sector remains full of untapped potential Private businesses’ nominal value added in Greece has fallen by 38 percent over the last ten years. Micro firms were hit particularly hard. Despite efforts to stabilize the macroeconomic environment, there are only weak signs of recovery. Future prospects are not much better, as—with the exception of labor market regulations—the conditions for investments and business activities have not been sufficiently changed through eight years of reform process. Fundamental issues—excessive red tape, bulky administrative procedures, slow courts, complicated taxes, and an inefficient knowledge transfer—remain unaddressed. Greece cannot achieve its urgently needed strong and sustainable economic growth without these reforms. When the third economic adjustment program for Greece ends in August, so will external reform pressure. It remains an open question whether the government—current or future—will feel compelled to complete and implement the pending reforms.

The full report in DIW Weekly Report 29/2018

Wed, 18 Jul 2018 03:00:00 +0200
Verena Grass has successfully defended her dissertation Verena Grass, has successfully defended her dissertation at the Freie Universität Berlin.

The dissertation with the title " Aftermath of financial crises and natural disasters on public budgets" was supervised by Prof. Dr. Helmut Lütkepohl  (DIW Berlin, Freie Universität Berlin) and Prof. Ronny Freier, Ph.D. (DIW Berlin, TH Wildau).

We congratulate Verena on her success and wish her all the best for her future career!

Tue, 17 Jul 2018 11:28:00 +0200
Annika Schnücker has successfully defended her dissertation Annika Schnücker, who works at the Macroeconomics department, has successfully defended her dissertation at the Freie Universität Berlin.

The dissertation with the title "Model Selection for Panel Vector Autoregressive Models" was supervised by Prof. Dr. Helmut Lütkepohl (DIW Berlin, Freie Universität Berlin) and Prof. Dr. Dieter Nautz (Freie Universität Berlin).

We congratulate Annika on her success and wish her all the best for her future career!

Tue, 17 Jul 2018 11:00:00 +0200
Georg Camehl has successfully defended his dissertation Georg Camehl, who works at the Education and Family department, has successfully defended his dissertation at the Freie Universität Berlin.

The dissertation with the title "Non-cognitive Skills and the Quality of Early Education - Four Essays in Applied Microeconomics" was supervised by Prof. Dr. C. Katharina Spieß (DIW Berlin, Freie Universität Berlin) and Prof. Jan Marcus, Ph.D. (DIW Berlin, Universität Hamburg).

We congratulate Georg on his success and wish him all the best for his future career!

Tue, 17 Jul 2018 10:30:00 +0200
Fellowship by the Research Foundation Flanders (FWO) for Melissa Newham Melissa Newham (Firms and Markets Department and KU Leuven), was granted the ICM-FWO Fellowship by the Research Foundation Flanders (FWO), which is the most prominent funding channel for PhD students in Belgium. The funding period is one year renewable twice. Melissa will conduct her research on "common ownership", which occurs when firms are at least partially owned by the same investor, and market entry strategies in the pharmaceutical industry.

Wed, 11 Jul 2018 05:40:00 +0200
Affordable Electricity Supply via Contracts for Difference for Renewable Energy The cost of renewable energy technology has plunged in recent years. But the extent to which electricity consumers can benefit from the reduced costs depends on the design of renewable remuneration mechanisms. Calculations of a financing model show that the current sliding premium is leading to increasingly higher risks for investments and in turn, increasing equity requirements. As a result, financing costs increase, which counteracts the lower cost of technology. Furthermore, increased equity requirements could negatively affect the diversity of players investing in renewable energy and thus the level of competition as well as the rate of project realization in the sector. A change towards contracts for difference (CFDs) can remedy the situation. CFDs lead to low financing costs and therefore reduce overall costs of supplying renewable electricity, reducing expected annual costs for German consumers by approximately 0.8 billion euros per year by 2030. They also safeguard consumers against high payments for renewable electricity in case of high electricity prices. A transition to CFDs provides the opportunity to create more effective and simpler incentives for system-compatible site selection and plant design.

The full report in DIW Weekly Report 28/2018

Wed, 11 Jul 2018 04:00:00 +0200
Sascha Drahs has successfully defended his dissertation Sascha Drahs, who worked at the Public Economics department, has successfully defended his dissertation at the Freie Universität Berlin.

The dissertation with the title "Essays in Public Economics" was supervised by Prof. Dr. Peter Haan (DIW Berlin, Freie Universität Berlin) and Prof. Georg Weizsäcker, Ph.D. (Humboldt-Universität zu Berlin, DIW Berlin).

We congratulate Sascha on his success and wish him all the best for his future career!

Tue, 10 Jul 2018 11:09:00 +0200
Call for Papers: Quarterly Journal of Economic Research 1/2019 „Future of capital funded old age provision in Germany – sovereign wealth funds versus individual retirement accounts“

Editors: Timm Bönke, Markus M. Grabka and Carsten Schröder

In May 2018, the German Federal Ministry of Labour and Social Affairs duly convened the pension commission “reliable inter-generational contract (Verlässlicher Generationenvertrag)”. In brief, the ambitious mission is to present “a roadmap to ensure a sustainable safeguard and advancement the old age security systems for 2025 and beyond and to build the foundation for a new and reliable inter-generational contract”.

The challenges for the German old age-security system are large. The replacement rate of the statutory pension insurance (Gesetzlichen Rentenversicherung) is today already less than 50 percent and scheduled to decline even further to 43 percent in 2030. According to estimation of the Federal Statistical Office, the old-age dependency ratio – the ratio of persons 60 and older to persons between 20 and 60 – will distinctly rise form 49.7 in 2013 to 74.5 in 2030. A development at a time where the federal grant to support the budget of the statutory pension insurance is around 91 billion Euro and hence the largest position within the annual budget of the German Federal Ministry of Labour and Social Affairs.

In the past, the Rürup-Commission introduced a course for an inter-generational balanced financing of public, company and private based old age benefits. In particular, an adjustment of the German 3-pillar-system (public, company, and private old age provisions) was agreed to and with the introduction of subsidies for private old-age provisions – the so-called Riester- and Rürup-contracts – established. Albeit the number of Riester-contracts reached 16.5 million, the effectivity of Riester products is questionable and subject to fundamental critic: the products are deemed to complex, realize only low rate of returns and administrative costs are high. Further, low-income earners, a group especially threatened by old-age poverty in the future, show very modest participation rates. Therefore, many analyst assess the policies to stimulate private old age savings as insufficient. However, there is a pronounced interest to have a strong and profitable capital funded pillar next to unfunded public pillar in the German old age security system.

One possibility to broaden the basis for old age security are sovereign wealth funds in the form of pension funds. Here, the view abroad is revealing. Many countries established sovereign wealth funds for this purpose. Pension funds invest in capital markets in order to supplement rising future pension obligations due to demographic change with the realized returns from the investments. Since the 1990, several reserve funds were established at the state and federal level in Germany to counter rising pension obligation for civil servants. These pension reserve funds can be regarded as first beginnings of pension funds in Germany.
Another path is to establish government administrated individual retirement accounts or government regulated standard old age savings products to ensure easy access to capital markets while simultaneously keeping costs to a minimum, ensuring transparency and yield high rate of returns. Again, several international role models exist (e.g. Sweden).

Aim of the envisioned Quarterly Journal of Economic Research issue is to present experiences with capital funded sovereign wealth funds and individual retirement accounts as well as hybrids of both and to establish, which international role models provide interesting solutions for the German context and what are the challenges of an implementation in Germany. Scrutinized aspects are covered individuals, the necessity for obligatory participation and basis of funding, rate of returns and investment strategies, administration, etc.

Welcome are both empirical and theoretical contributions. Political implications of presented findings should be explained and discussed. In addition, we are interested in position papers from organization, policy makers and business. The emphasis is on examples of currently existing or former sovereign wealth funds and capital funded individual retirement account schemes.

The editorial team is responsible for the issue of the Quarterly Journal of Economic Research. Authors who consider a contribution (German or English) are asked to submit an abstract (maximum 1 page) until August 31, 2018 to Markus M. Grabka ( Authors will receive a timely response if the contribution will be considered. Final contributions should not exceed 30.000 characters and have to be submitted by December 15, 2018. Final contributions will be subject to copyediting and a review process. The issue is scheduled to be published in spring 2019.

Mon, 09 Jul 2018 10:12:00 +0200
Natural Gas Supply: No Need for Another Baltic Sea Pipeline The construction of a second Baltic Sea natural gas pipeline from Russia to Germany (Nord Stream 2) is very controversial for political, energy economic, and ecological reasons. The project owner and some European energy companies argue that it is a profitable, private-sector investment project that is necessary to secure natural gas supplies for Germany and Europe. However, DIW Berlin analyses show that the planned pipeline project Nord Stream 2 is not necessary to secure natural gas supplies for Germany and Europe. The energy consumption forecasts on which the project is based, especially the EU Reference Scenario, significantly overestimate natural gas demand in Germany and Europe. On the supply side, there will be no supply gap if Nord Stream 2 is not built. Different profitability studies suggest that high losses up to the billions can be expected from the project. It is also unclear to what extent Nord Stream 2 would lead to higher prices for natural gas customers in Germany.

The full report in DIW Weekly Report 27/2018

Wed, 04 Jul 2018 04:00:00 +0200
Linking Cap-and-Trade Systems Linking cap-and-trade systems promises gains in cost effectiveness and signals a strong commitment to carbon policy. Linking is also seen as one possible way of converging from regional climate policy initiatives toward a global climate policy architecture. Two linked systems have been established recently, one in Europe and one in North America. However, linking also comes with challenges, such as increased exposure to shocks originating in other parts of the linked system and a greater need for policy coordination. We first consider the benefits and challenges of linking conceptually. We then present some of the main features of the European and North American linked systems and outline the process that led to their establishment. Finally, we consider preliminary evidence on the workings of each linked system.

Tue, 03 Jul 2018 12:00:00 +0200
Gigabit access: Germany lags behind in international comparison but demand is low Broadband internet expansion is a topic of widespread discussion in Germany right now. But the country still has not met its own targets. Almost 100 percent of households are supplied with broadband connections with up to six megabits per second, yet Germany has lots of room to catch up when it comes to gigabit-capable connections—particularly in sparsely populated regions. On the demand side, copper cable connections are the technology with the largest market share. At between one and two percent, pure fiber-optic connections only play a minor role. In international comparison, Germany’s need to get up to speed becomes very obvious. The OECD average for fiber-optic connection demand is 21 percent of the overall broadband market. Currently, a relatively low willingness to pay and high investment costs are slowing down the momentum of both demand and supply in Germany. But demand is on a constant growth course. In order to develop a full-coverage gigabit infrastructure by 2025, the government should aim for a well-balanced combination of regulatory incentives for private sector investments and effective subsidies to cover “blank spots”.

The full report in DIW Weekly Report 25+26/2018

Thu, 21 Jun 2018 09:22:00 +0200
Net neutrality: prioritization is beneficial from an economic perspective The principle of net neutrality was adopted by the European Union as a regulation promoting equality among all data packets in the Internet. Considering net neutrality from a purely economic viewpoint, however, the general possibility to prioritize data packets would likely lead to a more efficient use of existing network capacity. This is particularly applicable given the growth in data traffic and time-sensitive applications such as live streaming. Competition among network operators could intensify if they had the possibility to differentiate their offers more finely—and private households would be the primary beneficiary. However, modifications in the spirit of net neutrality must go hand in hand with a clear commitment to competition law and its enforcement. Access to prioritization of individual data packets must be transparent and equally available to all network participants. Network operators which also act as content providers as well as market participants with strong market positions in particular must not have the possibility to discriminate content providers.<

The full report in DIW Weekly Report 25+26/2018

Thu, 21 Jun 2018 09:22:00 +0200
The German economy is slowing down somewhat According to DIW Berlin estimates, the German economy should grow by 1.9 percent this year and 1.7 percent next year. The GDP growth forecast has thus decreased by 0.5 percentage points for this year and by 0.2 percentage points for the coming year compared to DIW Berlin’s March forecast. Essentially, this reflects the markedly increased uncertainty concerning the economic policy environment that is affecting investment activity worldwide and curbing exports in particular. In addition, the start of 2018 was weaker than was expected in March due to some temporary factors: high rates of sick leave, broad-based strikes, and an above-average number of holidays.

Fri, 15 Jun 2018 09:44:00 +0200
The global economy and the euro area: Increased uncertainty is dampening growth The political conditions for growth are currently dominated by increased uncertainty; this is particularly weighing on investment activity and slowing down the global economy. DIW Berlin is lowering its forecast slightly for this year and the next to 4.1 percent and 3.9 percent, respectively. However, global expansion appears to remain intact. In developed economies, primarily the good labor market situation is supporting consumption. In the United States, higher growth than at the beginning of the year is expected due to fiscal stimulus. The outlook for the euro area has deteriorated recently, however. Many emerging countries are also under greater pressure—in addition to domestic issues mainly caused by a tightening of international financial conditions. Over the course of the rest of the year, the rise in global interest rates, the first labor shortages in developed economies, and a further gradual deceleration of growth in China are expected to slow down the global economy more. The main risks for the continuation of the global upswing are primarily the United States’ protectionism and political uncertainties in the euro area.

The full report in DIW Weekly Report 24/2018

Fri, 15 Jun 2018 09:25:00 +0200
German economy: Slowdown in sight Compared to last year, the German economy is weakening noticeably. Orders from abroad are decreasing and domestic companies are holding back on investments. However, capacity utilization remains high—also because the government will boost the incomes of private households next year. However, above all, incomes are rising noticeably due to the positive situation in the labor market: the unemployment rate will fall to 5.2 percent this year and 4.9 percent next year. All in all, the German economy will grow by 1.9 percent this year and 1.7 percent in 2019.

The full report in DIW Weekly Report 24/2018

Fri, 15 Jun 2018 09:24:00 +0200
A stabilization fund can make the euro area more crisis-proof Reorganizing European fiscal policy is a main topic in current reform considerations. In particular, the creation of a European stabilization mechanism is being discussed. This study examines the macroeconomic effects of a stabilization fund, the economic consequences of which are analyzed in an equilibrium model. The model shows that a stabilization fund reduces economic fluctuations and is thus a mechanism for making the entire currency area more crisis-proof in the future. However, it should be noted that a stabilization fund may be more politically feasible than shifting responsibility from the national level to a new European Ministry of Finance. Moreover, moral hazard in regards to the behavior of individual countries must be taken into account when designing the stabilization fund. For example, parallel to the introduction of a European stabilization fund, compliance with fiscal rules should be effectively enforced.

The full report by Marius Clemens and Mathias Klein in DIW Weekly Report 22/2018

Wed, 06 Jun 2018 05:00:00 +0200
Income Distribution in Germany : Real Income on the Rise since 1991 but More People with Low Incomes Between 1991 and 2015, the real disposable, needs-adjusted income of persons in private households in Germany rose by 15 percent on average. The majority of the population has benefited from the growth in real income, but the groups at the lower end of the income distribution have not. Inequality in both market and disposable needs-adjusted household income has remained high. These are the findings of the present study based on data from the Socio-Economic Panel (SOEP) study. The risk-of-poverty rate was 16.8 percent in 2015, in comparison to around 11 percent in the mid-1990s. The risk-of-poverty rate among the population without a migration background was 13 percent. At 29 percent, it was more than twice as high for persons with a direct migration background - those who were born in a foreign country and then migrated to Germany. The increase in the risk-of-poverty rate is mainly the result of the higher proportion of migrants. Differentiating by housing status yields a constant low risk-of-poverty rate for homeowner households, while tenant households must confront a significant increase in the risk of poverty.

The full report by Markus M. Grabka and Jan Goebel in DIW Weekly Report 21/2018

Thu, 24 May 2018 10:20:00 +0200
Upward and downward social mobility probabilities have converged for men and women This study investigates professional social mobility, i.e., changes in one’s occupational status compared to that of their parents. It uses data from the German Socio-Economic Panel (Sozio-ökonomisches Panel, SOEP) on middle-aged, western Germans who were born between 1939 and 1971. On average, social status relative to parents has increased (absolute social mobility). However, looking at how positions change from parents to their children relative to their respective cohorts (relative social mobility) shows that, on average, little has changed in this respect since the Second World War. A person is still much more likely to achieve a position in the top status group if the parents already had such a position. Looking at specific social groups, the picture is more differentiated. Mobility patterns for men and women have largely converged during the observation period: men experience downward mobility more often than before and women experience upward mobility more frequently.

The full report by Nicolas Legewie and Sandra Bohmann in DIW Weekly Report 20/2018

Thu, 24 May 2018 10:19:00 +0200
Maximilian Bach wins BeNA Innovation Research Award 2018 Maximilian Bach, a DIW PhD candidate and Research Associate at the Education and Family Department, has received the BeNA Innovation Research Award 2018. The prize was awarded for his current paper "Teacher Incentives and Grade Retention" at this year's  BeNA Labor Economics Workshop on May 14.

The GC congratulates Max on his success!

Tue, 22 May 2018 10:19:00 +0200
Jonas Jessen Receives a Grant from the German Academic Scholarship Foundation Jonas Jessen, from the Education and Family department, has been granted a scholarship from the German Academic Scholarship Foundation (Studienstiftung des deutschen Volkes) from June 2018 on.

The Dean of the Graduate Center, Prof. Weizsäcker congratulates him on his success!

Fri, 18 May 2018 04:24:00 +0200